Weekly Outlook: Feb 15 - 19

The dollar continues to depreciate against the majors, 3.5% down since January against the basket of major currencies as the worries for banking system culminated. The European Central Bank and the Bank of Japan are playing with negative interest rates, while the hawkish move by Fed to start “normalizing” monetary policy in December, rising interest rates became a nightmare. As the economic growth worsens and the central bank’s easing policies are effectiveness, investors are running to safe-haven assets like gold and yen.

[B]Yellen doesn’t take off the table the negative interest rates[/B]
Last week Yellen’s testimony revealed that even the negative interest rate policy is not off the table for the Fed! The Fed Chairwoman Janet Yellen is studying ways to prepare the economy for another recession or even a financial crisis as the financial sector is stressed of the global stock market steep drop. The policymakers will revise again the monetary policy and they would even look into negative interest rates if needed. “I wouldn’t take those off the table,” she said. At her testimony on Wednesday, she expressed her concerns that the recent global risk will weigh on the US economic activity. However, she said that the continuing employment gains and the strong wage growth could support the economy.

From my side, all these are translated to the willing of a weaker dollar for the economy to expand at a strongest and more stable pace and ways to prepare the market that they would postpone the series of gradual rate hikes. The central bank policymakers miscalculated the risks the economy was apt to and began the historical “normalization” procedure that is possible to turn negative for the economy if they do not manage it wisely. I wouldn’t expect negative interest rates in the near future but I wouldn’t be surprised if the central bank uses other tools to ease the monetary policy and boost the growth.

[B]The Week Ahead: Feb 15 – 19[/B]
This week promises to inundate traders with a plethora of macroeconomic data. The FOMC and the RBA meeting minutes will be published! Moreover, a speech from Mario Draghi, the UK and Australian employment reports as well as the UK and US inflation report will be closely watched.

On [B]Monday[/B], the US and the Canadian market will be closed due to public holidays, thus, I would expect volatility to be thinner than usual. In Eurozone, the only notable macroeconomic data is December’s trade balance and ECB President’s Mario Draghi speech. The president will give an introductory statement at the quarterly hearing before the committee on Economic and Monetary affairs (ECON) of the European Parliament in Brussels. Overnight, the Reserve Bank of Australia will publish its meeting minutes and the Reserve Bank of New Zealand will release its Inflation Expectations for the first quarter of 2016.

On [B]Tuesday[/B], traders’ interest will be on the UK inflation rate report and the ZEW Survey. The UK inflation rate is expected to have picked up to 0.3% yoy in January from 0.2% before but to have turned negative to -0.7% on a monthly basis from 0.1% before.

February’s ZEW Survey is expected to reveal weakness in German Current Conditions and Economic Sentiment. The print for Current Conditions is expected to fell to 56.0 from 59.7 before while the Economic Sentiment is forecasted to plunge to 3.2 from 10.2 prior. The Economic Sentiment for Eurozone is expected to decrease to the half! The forecasts are to have fallen at 10.3 from 22.7 before.

In US, the NAHB Housing Market index for February is expected to rise marginally to 61 from 60 before.

Early on [B]Wednesday[/B], the ECB will have a non-monetary meeting. A while later, the British employment report will be released. The unemployment rate in December is expected to fall even lower from the current record low to 5.0% while the average earnings to remain at the same levels. The Claimant Count in January, the people claim unemployment benefits are forecasted to decrease by 3.0K.

In US, the Building Permits and the Housing Starts for January are coming out as well as the industrial production and the capacity utilization. The FOMC minutes that are coming out later in the day will hog the limelight.

During the night, the Australian employment report will be published. The unemployment rate is expected to remain steady at 5.8% and the employed people to have increased by 15.0k in January versus a decrease of 1k before.

On [B]Thursday[/B], Eurozone’s current account for December will be out, a while before the ECB Monetary Policy meeting accounts. The US jobless claims will be out as usual.
On Friday, the UK Retail Sales will be eyed but more attention will be paid at the US Inflation Rate. January’s Inflation Rate is expected to rise up to 1.2% yoy from 0.7% before, while on a monthly basis is predicted to remain stable at -0.1%.

The Canadian Inflation and Retail sales will be out as well. The CB Leading Economic Index for January will be released. In Eurozone, the flash Consumer Confidence for February.

[B]NZD/USD Analysis[/B]
The supportive trend line is important, but the horizontal support level at 0.6557 is more likely to be the real key as to the future of this pair.

There is nothing due today concerning the NZD. Regarding the USD, there will be releases of Core Durable Goods Orders and Unemployment Claims at 1:30pm London time.

I wrote yesterday that this week’s open at 0.7155 might be supportive and so it has proved to be, although the really interesting support is this long-term bullish trend line that is getting closer and closer to the current price, which is shown within the chart below.

This pair really has to break up past 0.7245 and stay up there, otherwise it is eventually going to break below the supportive trend line and quite probably drop like a stone. Meanwhile, we can look to fade either 0.7245 or the supportive trend line.

We can see there is a trend line and three key resistant levels between 0.7245 and 0.7300, and moreover, if this currency pair does hold up above there it will signal a major trend change with a long-term bullish move looking probable.

[B]USD/JPY Analysis

This pair fell quite convincingly below possible support at 112.50 and 112.00 and had almost reached the previous key swing low around 111.00 when the pair short up more than 100 pips on what looked from the chart to be really strong buying between 111.00 and 112.00.

This has all the hallmarks of an intervention by the Bank of Japan who are probably defending 111.00 and want to see the price above 112.00, although it is impossible to know for sure. This means that being short below 112.00 might be dangerous, but the Yen is very strong now and in this market environment it is a great currency to be long of. Therefore I still seek shorts on this pair but will be careful to lock in profits below 112.00.

This pair has been looking as if it might be finally finding a solid bottom after falling for many weeks. That bottom at around 1.3620 to 1.3650 is still intact but the price still just won’t break up and hold above any kind of technical level that would make it look as if an upwards move has really started. The longer we go without breaking below 1.3620, the more likely it is that this turn is going to happen here, but for the time being it is still a situation of watchful waiting.

[B]GBP/USD Analysis[/B]

This pair again made a new 7 year low yesterday and there is no end to the fall in sight although there was a pullback during yesterday’s New York session. The bearish trend and sentiment are so strong that it is very easy to trade this pair short without waiting for a deep pullback. It seems that any retracement to a .50 or .00 round number level is good enough to expect a resumption of the downwards move.

For some time this pair has been falling towards the zone from 1.1000 to 1.0900 which was previously strong resistance which has not been retested since the bullish breakout above 1.1000 that occurred some time ago. Yesterday the price kept falling until it hit the key level of 1.0967 at which is rose with some momentum. It might well keep going from here. A good test of how bullish this pair really is will be whether it reaches 1.1080 fairly soon and how the price reacts at that level.

EUR/JPY for February 26, 2016

Trading recommendation:

We are long EUR from 123.80. We will move our stop higher to 123.35. If you are not long EUR yet, then buy near the area of 124.14 - 124.35 and use the same stop at 123.35.

[B]Trading recommendation:[/B]

This correction keeps throwing the worst curve balls at us and we will stand aside for a while.

[B]Technical analysis of USD/CHF for March 07, 2016 [/B]

[B]Intraday technical levels:[/B]

R3: 1.0086
R2: 1.0022
R1: 0.9958
PP: 0.9887
S1: 0.9799
S2: 0.9730
S3: 0.9653

If the pair fails to pass through the level of 0.6766, the market will indicate a bearish opportunity below the level of 0.6766. So, the market will decline further to 0.6729 and 0.6695 to return to the daily support. Moreover, a breakout of that target will move the pair further downwards to 0.6670. On the other hand, if a breakout happens at the support level of 0.6766, then this scenario may be invalidated.

[B]Gold analysis for March 07, 2016[/B]

[B]Daily Fibonacci pivot points:[/B]
Resistance levels:[/B]

R1: 1,267.00

R2: 1,274.00

R3: 1,285.00

[B]Support levels:[/B]

S1: 1,244.20

S2: 1,237.10

S3: 1,225.50

Trading recommendations for today: Be careful when selling gold and watch for potential buying opportunities on dips.

[B]Fibonacci Pivot Points:

Resistance levels[/B]:

R1: 1.6320

R2: 1.6350

R3: 1.6395

[B]Support levels:[/B]

S1: 1.6225

S2: 1.6195

S3: 1.6150

Trading recommendation for today: Watch for potential selling opportunities on rallies.

[B]EUR/JPY for March 7 - 2016 [/B]

[B]Trading recommendation:[/B]

Our stop at 123.18 was hit for a small profit. With the prospect of a running triangle unfolding, we will be looking for a new EUR selling opportunity. We will sell EUR at 123.88 with a stop at 124.45

[B]Technical outlook and chart setups:[/B]

The GBP/CHF pair is seen to be inching higher above trend line resistance, trading at 1.4050 levels now. The pair is soon approaching fibonacci 0.618 resistance of the drop between 1.4320 and 1.3726 levels respectively. Also the counter trend rally that had begun from 1.3726 seems to have hit initial target at 1.4042 levels (depicted here in Red color). The pair has broken above trend line resistance but it needs to clear 1.4315/20 levels to confirm a bullish reversal. Hence it is recommended to remain short with risk above 1.4320 levels for now. Immediate resistance is seen at 1.4300 levels, while support is seen at 1.3730 levels respectively.
Trading recommendations:[/B]

Remain short with stop above 1.4320 levels. A target is open.

Good luck!

[B]Technical analysis of Silver for March 07, 2016[/B]

[B]Technical outlook and chart setups:[/B]

Silver is seen to be trading at $14.90/92 levels again, after printing lows at $14.70 levels yesterday. The metal seems to be preparing to drop lower at least through $14.50/55 levels from here. Please note that it is also fibonacci 0.618 support levels, of the rally between $13.70 through $15.93 levels, as seen here. Furthermore, the counter trend (drop from $15.93) extension is also converging at $14.50/55 levels, which instills further confidence for a bullish bounce. It is hence recommended to remain flat for now, but look to initiate fresh long positions around $14.50 levels. Immediate support is at $14.50 levels, while resistance is seen at $15.10 levels respectively.

[B]Trading recommendations:[/B]

Remain flat for now, look to buy lower.

Good luck!


1.3957 - WR2

1.3706 - WR1

1.3605 - Weekly Pivot

1.3480 - Intraday Resistance

1.3386 - Intraday Support

1.3350 - WS1
Trading recommendations:[/B]

Day traders should refrain from trading and wait for a better tr